By Charles F. Moreira, Editor
According to an updated Reuters Africa report published on 8 January 2020 night, India’s Ministry of Commerce and Industry had issued a notification declaring that the import of refined palm oil “is amended from ‘Free’ to ‘Restricted’”.
Four industry sources had told Reuters that the Ministry’s notification effectively bans the import of refined palm oil into India, whilst India can continue to import crude palm oil.
Whilst Reuters did not say whether the Ministry had specifically targeted refined palm oil imports from Malaysia, however this restriction will adversely impact Malaysia which is the main supplier to refined palm oil and palm olein to India, whilst it is likely to help Indonesia which is biggest exporter of crude palm oil.
Crude palm oil is the oil extracted from the flesh of the oil palm fruit before it is shipped to palm oil refineries which further process it into higher value-added and marketable products such as cooking oil, shortening and margarine.
Palm olein is another form of refined palm oil which is widely produced as edible oil in tropical countries. It’s also can potentially be used as renewable raw materials in the chemical modification process to synthesise polyols, polyurethane, and biolubricant for industrial and pharmaceutical products application.
Also, Reuters did not say whether the Ministry had specifically indicated that this move was in retaliation to criticism of India’s Citizenship (Amendment) Bill 2019 (CAB) by Malaysia’s Prime Minister Tun Dr. Mahathir Mohamed’s at the Kuala Lumpur Summit – an international conference of the world’s Muslim leaders from 18 to 21 December 2019, as well as Mahathir’s earlier criticism at the United Nations on 27 September 2019, of India’s presidential decree on 5 August 2019, which revoked Article 370 of India’s constitution that guaranteed special rights to the Indian-administered Muslim-majority state of Kashmir, including the right to its own constitution and autonomy to make laws on all matters except defence, communications and foreign affairs.
However, this is fairly widely believed to be so, even though it is not officially stated a such by India’s government led by Indian nationalist Prime Minister Narendra Modi, who is regarded by some as the “Donald Trump of India”, who aims to put India first.
This move is also consistent with a wider worldwide trend towards election of more nationally-oriented populist governments and the electoral gains of more national-populist parties and national leaders especially in Europe and North America.
It’s also consistent with the trend towards reversal of the neo-liberal tide towards globalism, open borders and free trade in Europe and North America, which began with the election of Margaret Thatcher as Prime Minister of the U.K. in 1979 and of Ronald Reagan as President of the U.S. in 1980, and especially after the World Trade Organisation was founded on 1 January 1995, following the collapse of the Soviet Union in 1991 and the end of the Cold War, and after the spread of public access to the Internet worldwide in the early to mid-1990s.
Evidence of this recent trend can be found in the result of the Brexit referendum in 2016 which voted for the U.K. to leave the European Union, the election of “Make America Great Again” Trump as U.S. President in November that year, the election of nationalist-populist governments in Italy, Poland and other countries in Eastern Europe, electoral gains made by Euro-sceptic, nationalist-populist parties in France, Austria and other parts of Europe, the election of Narendra Modi and his Bharatiya Janata Party (BJP) in May 2014 and so forth.
This move also follows indications in the past several years of the Indian government’s intention to restrict the import of finished goods such as electronics, certain textiles, automobiles and high-end consumer products like watches in a bid to protect India’s domestic industries, reduce the current account deficit and support the rupee.
Drop in CPO and palm fruit prices?
The above move by India raises questions as to by how much it will adversely impact prices of crude palm oil and oil palm fruit prices in Malaysia, which have been on an up-trend over the past year.
According to the Malaysian Palm Oil Board, daily prices of crude palm oil (CPO) rose by about 50% from RM2,019.50 per tonne on 2 January 2019 to RM3,025.50 per tonne on 31 December 2019 and as of 7 January 2020, it was at RM3,061.50 per tonne, so had been continuing its up trend until now.
Also, prices of oil palm fruit at the mill gate in January 2020 were roughly RM200 per tonne higher than in January 2019 and also about 50% up.
Whilst prices of oil palm fruit tend to rise and fall correspondingly with the price of crude palm oil, however it’s the price of oil palm fruit at the mill gate – i.e. the input to palm oil extraction plants, which is of greater significance politically since it’s what both corporate oil palm plantations as well as oil palm smallholders earn from the produce of their plantations, and for politicians in government, especially happy smallholders mean more potential votes for them.
Obviously, India’s 5% percentage points increase in import tax on Malaysian palm oil from 45% to 50% in early September 2019 didn’t put Malaysia’s palm oil refineries and oil palm plantations into a tailspin as some parties in Malaysia had expected.
However, whilst higher import tariffs may deter imports of items to some extent but like speed bumps on roads which slow traffic down, they however don’t block imports altogether and it’s up to the importers as to whether they are prepared to pay more for the imported items.
On the other hand, restrictions or bans either greatly limit or altogether forbid imports by force of law and may require importers to apply for import permits and effectively raises barriers to free trade.
Also, Malaysia could retaliate by restricting or banning imports of certain items from India and this tit for tat between India and Malaysia could escalate to unhealthy levels for both countries.
Some background to the current spat.
The CAB was passed by the lower house of India’s Parliament (Lok Sabha) on 9 December 2019 and by the upper house (Rajya Sabha) two days later.
According to an official statement by India’s Ministry of Home Affairs, the bill enables the fast-track granting of Indian citizenship to persons belonging to Hindu, Sikh, Buddhist, Jain, Parsi and Christian communities grounds of religious persecution in Pakistan, Afghanistan and Bangladesh, and that the Narendra Modi government is committed to protect rights of existing citizens of India equally and that the bill is not against any minority in India. However, besides Muslims, also excluded from the bill are Jews, agnostics and atheists.
According to Free Malaysia Today of 20 December 2019, Tun Dr. Mahathir Mohamed had criticised India’s ruling Bharatiya Janata Party (BJP) over a new citizenship law that has sparked violent protests throughout the subcontinent over claims of religious discrimination.
“I am sorry to see that India, which claims to be a secular state, is now taking action to deprive some Muslims of their citizenship,” he told reporters at the Kuala Lumpur Summit 2019. He added that Malaysia on the other hand has been fair in giving citizenship.
According to The Star, that same day, India’s government countered that Tun Dr. Mahathir’s comments on the CAB were factually inaccurate, and Malaysia’s Prime Minister should refrain from commenting on developments in India.
“The Act does not impact in any manner on the status of any citizen of India, or deprive any Indian of any faith of her or his citizenship. Therefore, the Prime Minister of Malaysia’s comment is factually inaccurate. We call upon Malaysia to refrain from commenting on internal developments in India, especially without a right understanding of the facts,” the MEA said in a statement issued on 20 December 2019.
According to the South China Morning Post of 31 December 2019, in the last week of December 2019, India had summoned Malaysia’s charges d’affaires in New Delhi over Mahathir’s comments on the CAB.
However, Malaysia’s Foreign Minister Saifuddin Abdullah dismissed this as “normal when a country is dissatisfied or when there is an event or statement that requires further clarification”.
“Everything remains good between both countries and there are no issues about strained ties or problems arising from this,” Saifuddin told local media.
However, some non-governmental observers of Malaysia’s foreign policy were not as sanguine about the number of countries currently at odds with Kuala Lumpur, and given this move by India, they have turned out to be right
Opposition from within India
The passage of the bill was immediately met by protests by leaders of India’s political parties besides Prime Minister Narendra Modi’s Bharatiya Janata Party (BJP) and Shiv Sena, across major India’s major cities including New Delhi, Mumbai, Ahmedabad, Bengaluru, Chennai, Srinaga and others.
Students, Islamic groups, some civil servants, many well-known Bollywood actors and distinguished academics joined the protests, and in a statement released by her publisher, Arundhati Roy, one of India’s most famous writers, compared the bill together with the National Register of Citizens (NRC) to the Nazis’ 1935 Nuremberg laws, which blocked Jews from German citizenship.
They regard the CAB as part of Prime Minister Modi’s Hindu-nationalist agenda to marginalise the country’s 200 million Muslims, though Modi denies that.
According to Time magazine of 16 December 2019, activists regards this as the latest move in the BJP’s broader agenda to create a ‘Hindu nation’, with the government’s recent revocation of the special status of the muslim-majority state of Jammu and Kashmir and plan to build a Hindu temple at the site of a mosque demolished by a Hindu nationalist mob in 1992.
Protests turned bloody in Guwahati, Assam in north-eastern India where police fired bullets and tear gas as groups of protesters, some numbering several hundred, demonstrated in the streets, defying a curfew. Two people died from gunshot wounds and 11 were injured.
Protesters in Chabua set fire to government properties, including a post office, whilst a mob also set fire to the house of local lawmaker Binod Hazarika, from the BJP. Protesters also vandalised four railway stations in Assam and tried to set fire to them.
Assam’s population is 34% Muslim and 64% Hindu and of its 27 district, nine are majority Muslim.
In Assam, the population is furious because they see this as opening the door to mass immigration of Bengali Hindus from Bangladesh, whom they regard as a threat because of the general lack of resources in their extremely poor state.
Elsewhere, there is outrage at the assault on India’s secular constitution and especially on overwhelmingly poor people who are not all Muslim.
“Assam is not a dustbin so that central government will keep on dumping whoever they want in Assam,” Assamese film actress Barsha Rani Bishaya said. “People of Assam have woke up against the CAB this time and they will not accept the CAB.”
Also, several BJP leaders in Assam have also resigned in opposition to the legislation.
National Register of Citizens.
Registration of Citizens had already been implemented in Assam and it was found that many Indian citizens, especially the poor and those amongst the lowest castes, either never had or had lost documents such as birth certificates which would prove the residence in India prior to independence in 1947, and as it turned out, two million of Assam’s 33 million population were left out of the citizenship register, including non-Muslims.
Thus, it is believed that this citizenship registration requirement would leave many Muslims and others in India stateless.
Meanwhile, protests by hundreds of thousands against the CAB have been continuing in defiance of government restrictions, including sharp clashes with authorities in some parts of India.
Jammu and Kashmir
Mahathir had said that “despite UN resolution on Jammu and Kashmir, the country (Kashmir) has been invaded and occupied”. “There may be reasons for this action but it is still wrong. The problem must be solved by peaceful means. India should work with Pakistan to resolve this problem. Ignoring the UN would lead to other forms of disregard for the UN and the Rule of Law,” he added. Mahathir later published the same comments on his Twitter account.
On 11 October 2019, Reuters reported that India was considering restricting imports of some products from Malaysia, including palm oil and that according too unnamed government and industry sources, India’s government was looking for ways to limit palm oil imports and may place restrictions on other goods from Malaysia.
Earlier, Mahathir’s statement had sparked angry exchanges on social media with Indian social media users calling for a boycott of “all things Malaysian” and Malaysians calling for a boycott of “all things Indian”.
However, whilst there was no official government-initiated actions between India and Malaysia over this spat, however on 24 October 2019, the Times of India reported that the vegetable oil industry and trade association – the Solvent Extractors’ Association of India had called upon its 875 members – “”In your own interest as well as a mark of solidarity with our nation, we should avoid purchases from Malaysia for the time being. We trust you will heed our advice.”
According to Turkey’s Andolu Agency, Malaysia would most likely lose a lot in foreign exchange as India is the world’s biggest importer of palm oil and in 2018, Malaysia exported 6.84 billion ringgit (US$1.65 billion) worth of palm oil to India.
However, Primary Industries Minister Teresa Kok said the Malaysian government was not worried about the palm oil embargo.
“India never [officially] said they wanted to boycott or ban the import of palm oil from Malaysia. The statement came from the traders association, not the Indian government,” she said.
Likewise, Malaysian Economic Affairs Minister Azmin Ali said a boycott of the country’s palm oil by Indian traders will likely not be prolonged, as there are not enough supplies from top producer Indonesia to cover the shortfall.
“We are confident that we will be able to resolve this issue immediately and effectively,” he told parliament.
According to ASEAN Today of 1 November 2019, behind the nationalistic reaction to Tun Dr. Mahathir’s statement on Kashmir is a fundamental economic dispute. In mid-October 2019, a number of Indian traders said they would temporarily avoid Malaysian palm oil for the rest of the year due to concerns that the Indian government might raise import taxes or impose a quota.
Earlier in August 2019, India’s Ministry of Commerce and Industry had recommended raising import taxes on Malaysian refined palm oil in order to protect domestic producers and refiners. The proposal was backed by the SEAI in an effort to end a special agreement that had cut tariffs on refined palm oil from Malaysia to a lower rate than that from other countries.
However, there is opposition within India against any moves to cut palm oil imports from Malaysia. For instance, the Tamil Nadu Congress Committee, a political group in the southern Indian state of Tamil Nadu, called for Prime Minister Modi to avoid cutting imports of Malaysian palm oil, since such a move against Malaysia would negatively impact the hundreds of thousands of migrant workers from Tamil Nadu working in Malaysia, as well the large Malaysian Indian community.
Anyway, on 5 September 2019, Reuters reported that India had raised the tax on refined palm oil from Malaysia to 50% from 45% (a 5 percentage points increase) for six months to curb imports and boost local refining.
Back then, India, the world’s biggest edible oil importer, imposed a 40% import tax on crude palm oil and 50% on refined palm oil. But since January 2019, shipments of refined palm oils from Malaysia had been taxed at 45%, under an agreement with Malaysia.
This reduced the effective difference in duty between crude palm oil and refined palm oil from Malaysia for Indian refiners to 5.5% from 11%, making overseas purchase of refined palm more lucrative. This led to a 727% surge in Malaysia’s refined palm exports to India in the first half of 2019 to 1.57 million tonnes compared with the same period a year before, according to data compiled by the Malaysian Palm Oil Board.
The Mumbai-based SEAI said rising shipments of refined palm oil hit local refiners and filed an application with the Directorate General of Trade Remedies for an investigation and the directorate thus recommended raising the import tax on refined products.
The 50% duty on refined products was to be applicable until 2 March 2020 but after this notification of India’s restriction or ban on the import of refined palm oil, it could be a whole different story moving forward.
Meanwhile, on Malaysia’s domestic social and political front, I’m more concerned with the possible tit for tat political reactions in Malaysia against minorities here in response to policies undertaken by the Government of India which adversely impact or are seen to adversely impact upon minorities there.